D. H. HALAHAKONE, Appellant, and L. L. FERNANDO, Respondent

053-NLR-NLR-V-59-D.-H.-HALAHAKONE-Appellant-and-L.-L.-FERNANDO-Respondent.pdf

208
Halahakone v.[Fernand-
Present :K. D. de Silva, J., and Sansoni, J.
H. HALAHAIvONE, Appellant, and L. L. FERNANDO, Respondent.
S.C. 3G9—D. C. Negombo, 15S41/M
■Co-owners—Exclusive use of common property by one co-owner—Profits derived there-from—Right of the other co-owners to share the profits.
Where a co-owner oxcludes the othor co-owners from possession and puts thecommon property to its normal use, he must account- to the other co-ownersfor their proportionate share of the profits which ho makes.
The plaintiff and the defdndant were two co-owners of a coconut desiccatingmill and had the right to common enjoyment of it. The defendant infringedthat right when he alone earned the profits by excluding the plaintiff deliberatelyfrom possession..•-
Held, that tho plaintiff was entitled to recover a half share of the nett profits-earned by tho working of the mill.
SAXSONT, J.—Halahabone v. Fcmondo
200
jAlPPEAL from a judgment of the District Court, Negombo. * .
• jV. E. Weerasooria, Q.G., with H. TV. Jay&warde?ie, Q.G., G^T. Samera-toickreme, P. Ranasinghe and N.'R. M. Daluwalle, for the defendant-appellant."r‘
N. K. Ghoksy, Q.G., with J. M. Jayamanne, T. B. Dissanayake andMiss Maureen Seneviralne, for the plaintiff-respondent.
* Cur. adv. vult.
July 3, 1956. Sansoni, J.—
This is a dispute between two co-owners of a coconut desiccating mill.The mill and the land on which it stands were purchased by the plaintiffand the defendant’s brother on deed PI of 30th June, 1945, for a sum ofIts. 27,100. By deed P2 of 21st March 1946 the defendant bought hisbrother’s half share, and since then the plaintiff and the defendant havebeen co-owners of the land and the mill. The plaintiff and the defendanthad to spend over Its. 50,000 to put the mill into working order. Theexpenses incurred in this connection were shared by them, and the manu-facture of desiccated coconut was begun in March 1947. There was aquota system in operation during the years 1946 to 1950 under which theowners of such mills obtained a quota which permitted them to manu-facture a specified quantity of desiccated coconut. The quantity variedfrom year to year, but the right to obtain a quota was a very valuableone as the evidence shows.■
It is common ground that from the time the mill was worked in March1947, until it was closed down in September 1949 owing to the marketbeing unfavourable, the plaintiff and the defendant shared the profitsand the expenses of working the mill, and these included such profitsas were derived from the use of the quotas received for each year. Verylarge profits were earned by the co-owners during this period, as theaccounts produced by the defendant show. The nett profit of each co-owner foi’ only twenty-six days in March 1947 came to over Pa. 12,200,while for the year ending 31st March, 1948 each of them reaped a nettprofit of Rs. 63,444-75.
Late iri 194S or early in 1949 differences arose between the two co-owners. Each of them lias given his version of the dispute and has soughtto blame the other, but it is conceded by the plaintiff that when the quotaissued in the names of both of them was received by him early in 1949 hereturned it, as he and the defendant were unable to work the mill together.Prom that time the mill was hot worked until July 1950 because tho co-owners were unable to agree on a common basis of working it. On 26thSeptember 1949 the plaintiff filed a partition action, as common possessionwas impracticable, in order to have the common property divided, andin the following month he applied to the Court to have a Receiver ap- •pointed in respect of the common property.', The.defendant objected to .the appointment of a Receiver and no Receiver was in fact appointed. J
210
SANSOXI, J.—Halahakone v. Fernando
The defendant has admittedly been in possession of the mill sincethe partition action-was filed. He applied to the authorities for the issue-of the quota to him on the ground that he was in possession, but the plaintiffobjected to the issue of the quota to the defendant on the-ground thatthere was a dispute between the co-owner over the possession of the mill.Ultimately the defendant was informed by the authorities that the ques-tion of issuing a quota would have to await the decision of the Court inthe partition action. Owing to the dispute between the parties no quotawas in fact issued thereafter in respect of this mill,-and the quota systemitself ceased to be in force from June 1950. One result of the non-issue ofthe quota during that period was that the mill could not be worked.After the quota S3rstem was abolished the defendant alone worked themill, and admittedly for the period 11th July, 1950—31st March, 1951he earned a nett profit of Us. 64,951-78, and for the period 1st April1951—31st August 1951 he earned a profit of Rs. 4,943*09, totallingRs. 69,894-87.
The plaintiff brought this action on 9th August 1950 to recover fromthe defendant either damages on the basis that the defendant wrongfullyand unlawfully worked the mill by himself, or in the alternative to recovera half share of 'the nett profits made by the defendant. He claimedRs. 48,300 as due up to date of action and a further Rs. 13,650 per weekthereafter. The defendant in his answer pleaded that although he workedthe mill since 11th July 1950 his action was neither wrongful nor unlawfuland that he has not caused loss or damage to the plaintiff. In repli' tothe alternative claim for a share of the nett profits, he pleaded that therelationship between the parties was that of a partnership which couldnot be established in the absence of a written agreement. He furtherpleaded that in any event the plaintiff was not entitled to claim anythingmore than a half share of a reasonable rent for the mill and premises,and he assessed this half share at Rs. 400 per mensem. For a claim inreconvention the defendant pleaded that the plaintiff wrongfully andby fraudulent misrepresentations deprived the defendant of the quotasfor the years 1949 and 1950 and thereby caused loss and damage to him.He estimated his damages on this account at Rs. 118,019-85. Thelearned District Judge gave judgment for the plaintiff for Rs. 34,947*43and the incurred costs of this action. He disallowed the claim inrcconvcntion.
At the hearing before us much of the argument on behalf of the defen-dant-appellant was directed to showing that the relationship between theparties in respect of the business of running this mill was a partnershipwhich could not be established by the plaintiff as its capital was overRs. 1,000. But ultimately it was conceded by the defendant’s Counselthat even if there had existed a de facto partnership it had been terminatedby July 1950, since it was at most a partnership at will.
It thus becomes necessary to consider the rights and obligations ofthese parties in regard to the mill during the relevant period 11th July1950—31st August 1951 when the defendant-, as a co-owner in sole posses-sion, worked the mill himself. The short point for decision is whethersuch a co-owner, who uses the common property exclusively and makes
SANSONI, J.—Halahakonc v. Fernand9.
211
profit3 by such use, must account to his co-owner for a proportionate•share of those profits, or whether his liability is only to pay a reasonable. rent for the use of the property._
It was submitted for the defendant that a distinction must be drawnbetween a case'where the common property yields produce which is sold■"at a profit, for example a common land on which a plumbago mine isworked, and a' common property which can only be made to yield profitsby the use of raw material brought in from outside and manufacturedinto a finished product which is finally sold at a profit, as in the case ofthis mill. It was submitted that as in the latter ease the profits wereobtained by conducting a business, the common property being only oneadjunct of that business, it was the defendant’s industry which directly■produced the profits, and there is no reason why the plaintiff shouldobtain a half share of such profits.
On the other hand it was submitted for the plaintiff that this mill was acommon property which could only be worked as one unit, and althoughi t did not yield fruits directly as in the case of a plumbago mine, the normaluse of this mill yielded the profits and the defendant has no right toappropriate them entirely.
I do not think there is any such distinction as was sought to be drawnby the defendant’s Counsel, and it seems to me that if the profits aretraceable directly to the use of the common property those profits must beshared between the co-oiraers. The rule is that “ all profits accruingfrom the property must be divided proportionately among the jointowners ” 1. The author relies for this statement on Grotius’ Introduc-• tion 2, where it is stated that “ all profits and losses must be divided inequal proportions except such losses as are occasioned by bad faith or•extraordinary neglect of anyone ”. To the same effect is a pasage inDomat’s Civil Law 3 which reads “ he who has had the enjoyment ofthe common thing ought to communicate all the fruits and all the profitswhich he has made by it, for without this communication the equalit3rwhich ought to be observed among all the co-partners would be violated,”;and in paragraph 5 it is stated that “ those who have an affair or otherthing in common together are mutually accountable to one another for ‘their management and their conduct in relation to it. ” Domat is heredealing not with partnership as we understand it now, but co-ownership.The principle that all profits and losses connected with the commonproperty must be shared proportionately among the owners, except lossesoccasioned by bad faith or gross negligence, has been adopted in SouthAfrica. In Runcyman v. Scholtz * it was held that where a co-owner of anundivided farm lets any portion of it without the knowledge or consentof his co-owner he must account to the latter for his share of the profitsderived from such letting. The same principle underlies the decision inAppulmmy v. Adria 5 where Phear, C.J. said “ the joint ownership of a 'subject of property by a number of persons in common is a partnershipin which the partners manage their own affairs among "themselves by a
1 Wille, Principles of South* Bk. 2, Title 5, Sec. 2, Para 3..‘
African Law, p. 159..4 (1923) T. P. D. 45.'
-. 1 Bk. 3, 23, 9.■ -s (1379) 2 S. C. G. 166._ ' .
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KA_NSO.NI, J".—Halahakone v, Fernando
-common consent In that case it was decided that where only some oithe co-owners had dug and removed plumbago from the' common land,the others should not claim damages but an account of the plumbagowhich had been raised. -It would seem that tlio proper conception of aclaim made by one co-owner against another co-owner who has derivedprofits from the common property is that it is a claim for compensation,and not one for damages or mesne profits which would bo more appropriateagainst a person who had no title..
The plaintiff’s claim in this case to a share of the profits seems to me tobe all the stronger because very shortly after the defendant began towork the mill the plaintiff, through his lawyers, gave the defendant noticethat he was claiming a half share of the nett income, subject to an allowancebeing made to the defendant on account of his meeting theplaintiff’s share of the working expenses. In the alternative, the plaintiffsaid that lie was prepared to -take the mill over, work it, and pay thedefendant on the same basis. The plaintiff was even willing to entrustthe working of the mill to a Manager appointed by mutual consent. Nodefinite answer was given by the defendant, and the plaintiff filed actionshortly afterwards. The defendant has, however, stated in his evidencethat he was not agreeable to any .of these proposals and that he informed,his Proctor accordingly. Perhaps that is why no reply was sent.
Throughout the argument of the defendant’s Counsel a distinction wassought to be drawn between the common mill and the use to which itwas put, or the business, as it was termed, of producing desiccated coconut.It was argued that it was the business that yielded the profits and notthe mill. I caimot appreciate this distinction. If the only use to whichthe common property can be put is the business of producing desiccatedcoconut, it seems to me that there is no real difference between the conductof the business and the use of the property. Since admittedly there wasno partnership in existence from July 1930 while the mill was beingworked by the defendant alone, without any agreement subsisting betweenhim and the plaintiff, the only basis on which the plaintiff can claimcompensation for the use of his sharo of the common mill is as one co-owneragainst another who had the exclusive possession of the common proiierty,and I have already set out how such compensation is to be measured.We were not referred to any authority which stated that in such a casethe plaintiff should be compensated only on a rental basis. As I havepointed out already, these two co-owners had, when they were on friendlyterms, shared the profits accruing from the common working of this millduring the years 19IG—19IS, and I can see no reason why the defendantshould be in a better position because he deliberately kept the plaintiffout of possession.
And this brings me to what I consider an over-riding consideration inthis case. The plaintiff undoubtedly had the right to common enjoymentof this mill which belonged to both of them. The defendant infringedthat right, and lie alone earned the profits because he excluded the plaintiffdeliberately from possession. Can he by such conduct be allowed to
SAKSOXT, J.—Hnhthnlona v. Fernando
213
derive a greater advantage tiian lie would. have derived if tiie mill hadbeen worked in common ? Yet tliis is what the submission on behalfof the defendant amounts to. There are indications in the judgment ofHoward, C.J. (Soertsz, J. agreeing) in Vanderlan v. Vantlerlan 1 of theview he would have taken in a dispute such as this. In that case too acommon mill had been worked exclusively by some of the co-owners andtheir lessees, but the plaintiffs there had acquiesced in that method ofworking the mill on the understanding that they would be given theirshare of the lease rent. But the learned Chief Justice considered theprinciple that would generally be applicable and said : “ In view of theevidence of the plaintiff and the fact that the property was dealt with .by the defendant in accordance with the purpose for which the jointownei’ship was constituted, the user by the defendants and added defen-dants was lawful but in excess of the restriction imposed by law and theymust not appropriate to themselves more than their share. In the circum-stances the defendants can be regarded as being in default only in so faras they ha ve failed to pay the plaintiffs their share of the profits for workingthe mill ”. It seems to me, therefore, that the answer to the questionwhether, where a co-owner uses a common property exclusively and makesprofits by such use he must account to the others for their snare of theprofits, is clear.
In regard to the claim in rcconvention, I do not think that the plaintiffacted •wrongfully when he returned the quota early in 19-19 or when heprotested against the issue of the entire quota in respect of the mill to thedefendant. The plaintiff was acting in defence of his interests as a co-owner, and the subsequent attitude of the defendant proves that theplaintiff had not been unduly watchful of his own interests. It is un-fortunate that the parties could not agree to work this common millamicably, for the consequence was that the quota which was issued inthe names of both of them was rendered useless. When the defendantsought to obtain the entire quota for himelf, the plaintiff was quite entitledto protest since each was entitled to his share and no more. It was not theplaintiff’s fault if the defendant failed to persuade the authorities to issueto him a half share of the quota which was issuable in respect of theentire mill.-;
In the result the plaintiff is entitled to ice over a half share of the nettprofit earned by the working of this mill. But in order to arrive at thecorrect figure I think an allowance should first be paid to the defendantfor having solely conducted the working of the mill. It seems reasonablethat the defendant should be compensated for the time and energy ex-_pended by him, and I would allow him a monthly sum of Rs. 500 on thisaccount,-amounting to Rs. 7,334 for the period 11th July 1950—31st 'August 1951. The nett profit-shown in the defendant’s books shouldtherefore be reduced by this amount and would then bo Rs. 62,5G0'S7.The plaintiff is therefore entitled to Rs. 31.2S0-43..
With regard to the order of the learned Judge that the defendant should ’ .pay the plaintiff his incurred costs, I can see no justification for thisunusual order. ..The plaintiff’s claim.'was grossly exaggerated and if. it •
1 {1340 il A-'. L. R. 517.,
214
L. W. DE SILVA, A. J.—hucihamy v. Ciciliyanahamy
. had not been that the defendant made an unsustainable claim in recon-vention, the plaintiff would not have been granted even his taxed costsof the action. – V .'
I "would therefore set aside the decree entered, and direct that thedefendant should pay the plaintiff a sum of Rs. 31,280*43 and his taxedcosts in both Courts.,-'
r>E Selva, J,—I agree..-
••jDecree varied.